Erase Holiday Debt

The holidays are over. But you may have an unwelcome reminder of all the festivities coming your way: the bills for your merry spending.

Remember the gifts for friends and family, the office secret Santa present, travel to Grandma's house, the new outfit to wear to your friend's New Year's party?

While you might want to take an aspirin for your financial hangover, turn off the lights and climb back into bed, you shouldn't ignore those bills, says Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling.

"It will only get worse as the bills continue to arrive," she says, and failure to deal with debt early could result in a ruined credit score, preventing you from qualifying for a loan in the future or even getting a job.

So, take a deep breath, open those bills, and consider these tips for erasing your holiday debt.

Set an end date. Ms. Cunningham suggests setting a goal to pay off holiday debt by March 31, the end of the first quarter.

While you'll keep your credit score intact by paying the minimum balance on time every month, you won't be able to get out of debt quickly unless you pay more.

Stretching debt payments for holiday spending over a long time will negate any savings you might have gained from any seasonal sales or discounts, she says.

Leave the card at home. You won't put much of a dent in your balance if you keep charging.

If you're tempted by post-holiday deals, stick to cash. "It's much harder to pay for something if you pull cash out of your wallet," says Lynn Mayabb, a financial planner and senior managing adviser at BKD Wealth Advisors in Kansas City, Mo.

People who pay with cash spend about 20% less on average than those who use credit cards, says Ms. Cunningham.

Develop a plan. Budgeting is never a fun task, but it's the only way to get a good sense of where your money is going, how much you've got coming in, and how much you'll need to apply to your debt to get it paid off by your goal date.

Start tracking every cent that you spend for the next 30 days, including the pack of gum you buy at the gas station and the soda from the vending machine at work, says Ms. Cunningham.

And start making some sacrifices -- forgo dinners out, morning lattes and deluxe cable packages. Even scrutinize that New Year's resolution-induced gym membership, she says, and use those savings to pay down debt.

Look for extra cash. Think about ways to squeeze every cent you can from other sources as well.

Try to get your 2009 taxes done early and use any refund that you get to pay down your debt. Also, review your tax withholding on your W-4 form to see if you're deducting more than necessary each month, says Neal Ringquist, president and chief operating officer of wealth-management-solutions provider Advisor Software.

Mr. Ringquist also suggests reviewing credit-card statements to see if you're getting hit with any charges you might not be aware of, such as a subscription service whose free trial period ended months ago. Cancel any subscription services that you don't use.

Be sure to use those gift cards you received, he adds, and check out coupon Web sites such as eCoupons.com and Retailmenot.com to get the best deals on any necessary purchases.

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